China’s overheated auto market has just posted another miserable month, with May car sales edging up just 0.3 percent while a broader measure that includes cars, sport utility and multi-purpose vehicles fell 6.1 percent, according to the latest industry figures. (English article) The association that compiles the data is sticking to its previous gloomy forecast, first issued last month, that sales could actually fall for the year after notching red-hot growth in 2009 and more solid gains last year fueled by incentives from Beijing. In a bid to moderate the downslide, Beijing has just announced a new round of incentives that clearly have a rural flavor, perhaps as part of China’s efforts to spread more wealth to its smaller cities and towns. Under that plan, owners of farm vehicles, buses and heavy trucks can all trade in their clunkers for up to $2,800 in subsidies toward the purchase of a new vehicle. (English article) The head of the auto 
association that compiles the monthly sales figures was clearly not impressed by the latest plan to bring some momentum back to the industry, saying vehicle owners could make more by selling their clunkers on the secondary market. I would agree that this program won’t bring the industry roaring back to its previous growth days. But considering the growing importance of owning a car to one’s social stature, combined with the fact that I see little or no secondary market for the kinds of clunkers this program is targeting, I wouldn’t be surprised to see a slight rebound in car sales by the end of the year as rural folk look to hop aboard China’s latest car craze bandwagon. In the end, that should benefit the cheaper homegrown brands like Geely (HKEx: 175), BAIC and Chery.
Bottom line: China’s auto industry will remain sluggish for at least the next year, but a new incentive program aimed at rural buyers could give the market a surprise bounce by year end.
Related postings 相关文章:
◙ Autos: Good Times Screech to a Halt 中国汽车业：当繁荣已成往事
◙ GM’s China Growth Story Stalls Out 通用汽车在华增长势头受挫
◙ China’s Green Auto Dream: A Road Paved with Problems 中国的绿色汽车之梦：前途荆棘密布
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as I don’t know many details about this partnership even though I’m quite familiar with the companies, which both have excellent reputations in their home markets. My quick take is that this divorce probably reflects an inability to work well together, as both companies certainly have strong ideas about running a restaurant, especially in China where the cost of a cup of coffee is quite pricey compared with local incomes. At the same time, Maxim’s has never really shown a huge interest in China for its own brands, unlike Starbucks which is building new stores like crazy and just last year announced a major commitment to support local coffee growing in Yunnan province, China’s only natural coffee growing region. So what’s it all mean and who comes out the winner? In this case it could be a win-win, as Maxim’s gets to pull out of a market for which it apparently has little taste and quickly recoup its investment. Starbucks, meantime, gets to take over its China show completely, with both its challenges and rewards. Starbucks has tasted success in China’s big cities, where its stores are usually packed with lounging young professionals relaxing over a cup of daily brew. But whether or not it can replicate that success in less affluent southern cities where its Maxim partnership were concentrated could be more challenging as it seeks out a suitable business mix for these areas.
